A rear view of relaxing trader who is waiting for a success of his position in front of trading station. Trading at forex market. Singapore panoramic view.

World’s biggest market: Humans not allowed

November 8, 2017

The $5.1 trillion-a-day currency market is losing its human touch.

That’s the conclusion of trading and foreign-exchange heads surveyed by the organizers of the TradeTech FX conference in Miami. Of the 100 North America-based respondents, 94 said they aimed to automate more of their foreign-exchange trading operations in the next three years.

The market is embracing electronic and algorithmic trading, and Coalition Development Ltd. estimates that from 2012 to 2016 banks cut front-office sales, trading and research headcount by about a quarter in Group-of-10 foreign exchange. Automation has also gained favor after some of the world’s biggest banks were entangled in currency-rigging scandals that resulted in more than $10 billion in penalties. Last month, a former HSBC Holdings Plc executive was the first individual to be convicted for front-running after the revelations prompted investigations around the world.

“These scandals just accelerated that move” toward technology which enables investors to execute orders online and get better prices more rapidly, said Paresh Upadhyaya, a portfolio manager at Amundi Pioneer Asset Management, which oversees about $83 billion. “It gets people a little nervous and more accepting of regulations,” said Upadhyaya, who also sits on the conference’s advisory board and participated in the survey.

The poll shows market participants still have room to increase the amount of trading that steers clear of humans, with 62 percent of respondents having automated a quarter of their flows or less. Just 8 percent said automation accounted for more than half their flows.

“It’s an irreversible trend,” said Upadhyaya. “The focus in money management clearly is best execution for our shareholders, and it’s also important to keep expenses down.”

Priorities, Regulation

Here are some other findings from the TradeTech FX survey, which was conducted in the third quarter:

The biggest priorities for currency trading desks, apart from best execution, are:
Reevaluating broker and counterparty relationships (54 percent of respondents)
Finding alternative methods to source liquidity (49 percent)
Reducing costs (47 percent)
Regulation has had an overall positive effect on capital markets in the last decade (64 percent of respondents agreed with this)
London will lose its status as the global FX capital after Brexit (77 percent of respondents agreed)